How to Hire and Pay Seasonal Workers

October 15, 2015

The upcoming holidays are looking great for those looking for work. Across the nation, companies are already gearing up to hire seasonal workers. Macy’s plans to hire about 85,000 seasonal workers, Kohl’s Corp. expects to hire more than 69,000 seasonal workers and Toys R Us plans to hire 40,000 seasonal workers.

By enlisting short-term workers to meet high customer demand periods, savvy business owners can get a much-needed revenue boost without hiring full-time staff. Before you start posting on Craigslist or local newspapers, you need to understand applicable labor laws and tax regulations. Let’s review best practices for hiring and paying seasonal workers.

Review Numbers of Previous Holiday Seasons

It’s one thing is to say “the two stores next door think this will be a busy December!” but it’s another to realize that for the last two years your restaurant saw a year-over-year 15 percent revenue increase over the fourth quarter.

Even those retailers anticipating plenty of foot traffic during the holidays make adjustments to their numbers of seasonal workers per year. For example, in 2015 Toys R Us is expected to hire 5,000 fewer temps than it did during the last holiday season.

Use your holiday sales numbers from previous years to forecast this year’s numbers. Once you have a solid estimate, you can determine whether or not it makes sense to hire short-term employees. Depending on your unique situation, sometimes you may be able to do just fine by paying overtime hours to full-time employees and bringing part-time workers to a full-time basis for a limited time.

Determine a Profile of Your Ideal Seasonal Worker

Sometimes, you just need 10 extra bodies that can help unload the extra pallets from the holiday season between 4 and 5 a.m. three times a week. Other times you need two junior managers that can hit the ground running and manage a team of 30 workers.

Not all seasonal workers are alike. Generally speaking, there are three types of seasonal workers:

Temporary Workers: Often provided by a temporary staffing agency, these employees perform work on a temporary basis. Acting as the host employer, you provide a list of tasks to the staffing agency and, in turn, the staffing agency facilitates temporary workers that can complete those tasks successfully.

Contract Employees: Independent contractors provide their services to the general public on a contract basis. Some examples are mangers, accountants, handymen, lawyers or freelance writers. Contract employees are generally more skilled than temp workers.

Part-Time Workers: Working at least 20 hours per week, permanent part-time workers are great candidates that could continue employment after the holiday season either on a full-time or part-time basis.

To be able find the right candidate, you need to know what you’re looking for in the first place.

Consider Using Staffing Agencies

Once you have a clear idea of the profile of your seasonal workers, you’ll soon realize how easy or hard it’s going to be to find those workers. When you’re gearing up for the holiday season, you may have neither the time nor the manpower to find qualified candidates on your own.

To find the best candidates for temporary workers and contract employees, consider using a staffing or recruitment agency. While you should always plan to spend some time training all of your seasonal workers, a third-party employer can help you by providing trained workers that have not only been trained but are also held to a quality standard.

Additionally, the IRS states that part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees. A staffing agency can help you handle the processes to meet tax, legal and financial requirements and keep better track of your overall cost of hiring the extra help. Having a total hiring cost estimate from a staffing agency allows you to determine whether it makes more financial sense to use an agency or hire seasonal workers on your own.

Hire and Pay Seasonal Workers

In the case that you decide to hire and pay seasonal workers on your own, it’s important to review the applicable labor and employment laws of your state. While you’re responsible for providing legal wages and withholding applicable Social Security and Medicare amounts, there are some additional important points to remember:

Changing Minimum Wage: Several cities around the country have scheduled minimum wage increases for 2015 and beyond. For example, an employer in Hawaii paying the minimum to her seasonal workers during the fourth quarter of 2015 would pay them $7.75 per hour, but would have to pay them $8.50 per hour starting January 1, 2016. Budget according to these changes, when applicable.

Minimum Wage for Employees Under Age 20: Under the Fair Labor Standards Act’s Youth Minimum Wage Program, employees under the age of 20 working for less than 90 consecutive calendar days can receive a special minimum wage of $4.25 per hour. After 90 consecutive days of employment, the worker must receive at least the federal minimum wage, currently at $7.25 per hour.

Occupational Exemption: The Department of Labor exempts businesses operating in certain occupational fields, such as certain retail or service establishments, from part or all overtime and minimum wage guidelines.

IRS Form 941: While you need to fill out IRS Form 941 every quarter to report all of your paid employee wages, you only need to include the wages of seasonal workers in the quarter that they completed work. In the event that your business is only open during certain seasons, you don’t need to file Form 941 every quarter of the year. Just make sure that you check box 16 to indicate that you’re a seasonal employer every quarter that you do file Form 941.

IRS Form 1099-MISC: When you hire an independent contractor, you’re required to report compensation of at least $600 using Form 1099-MISC.

Payment Schedule: Depending on your needs, your seasonal workers may work just for a day, week, month or entire quarter. Learn the state laws of your state regarding frequency of payments. Some states may allow you to pay your seasonal workers at the end of employment, allowing you to avoid a cash crunch.

Tax Credits for Hiring Veterans: On top of receiving quality seasonal workers, by hiring veterans and disabled veterans you’re eligible for tax credits, such as the Work Opportunity Tax Credit, and reimbursement of some training and repurposing of facilities costs, such as the Special Employer Incentives.

Are you planning to hire seasonal workers? How are you planning to pay them? Tell us your story in the comment section below.

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